Models of Competitive Behavior
The cost of producing a megawatt of electrical energy is a function of:
- fuel price
- generation efficiency (the rate at which potential energy in the fuel is converted to electrical energy)
- operations and maintenance costs
In addition to this, generating plant incur fixed costs including:
- plant construction costs, and
- fixed operations and maintenance costs
Assuming perfect competition, the market-based price of electricity would be based purely on the cost of producing the next megawatt of power, the so-called short-run marginal cost (SRMC). This price however might not be sufficient to cover the fixed costs of generation, and thus power market prices rarely show purely SRMC pricing. In most established power markets, generators are free to offer their generation capacity at prices of their choosing. Competition and use of financial contracts keeps these prices close to SRMC, but inevitably offers price above SRMC do occur (for example during the California energy crisis of 2001).
In the context of power system simulation, a number of techniques have been applied to simulate imperfect competition in electrical power markets:
- Cournot competition
- Bertrand competition
- Supply function equilibrium
- Residual Supply Index analysis
Various heuristics have also been applied to this problem. The aim is to provide realistic forecasts of power market prices, given the forecast supply-demand situation.
Read more about this topic: Power System Simulation
Famous quotes containing the words models of, models, competitive and/or behavior:
“Today it is not the classroom nor the classics which are the repositories of models of eloquence, but the ad agencies.”
—Marshall McLuhan (1911–1980)
“Friends broaden our horizons. They serve as new models with whom we can identify. They allow us to be ourselves—and accept us that way. They enhance our self-esteem because they think we’re okay, because we matter to them. And because they matter to us—for various reasons, at various levels of intensity—they enrich the quality of our emotional life.”
—Judith Viorst (20th century)
“How deep is our desire to do better than our mothers—to bring daughters into adulthood strong and fierce yet loving and gentle, adventurous and competitive but still nurturing and friendly, sweet yet sharp. We know as working women that we can’t quite have it all, but that hasn’t stopped us from wanting it all for them.”
—Anne Roiphe (20th century)
“If parents award freedom regardless of whether their children have demonstrated an ability to handle it, children never learn to see a clear link between responsible behavior and adult privileges.”
—Melinda M. Marshall (20th century)